Understanding EMIs: How to Plan Your Monthly Repayments Better

Due to the high cost of property in India, buying a house can be a daunting experience in the absence of finance. More prospective home purchasers are resorting to this form of credit to finance the purchase of their house. The major duty of a prospective borrower is to have the precise amount of EMI that they owe.

A home loan refers to a sum of money borrowed from a financial institution to purchase, build, or renovate a property. This amount is repaid over a set period with interest through regular payments called EMIs. The purchased property serves as collateral, meaning the lender can seize and sell it if the borrower defaults on payments. If you want to plan your repayment smoothly, it is recommended that you pay small amounts as EMI over the Loan tenure.

EMI, or Equated Monthly Instalment, is a fixed amount of money a borrower pays to a lender every month to repay a loan. It includes both a portion of the principal (the original loan amount) and the interest charged by the lender. EMIs make large purchases like homes more manageable by spreading the total cost over a set period, typically years.

You may use the Home Loan EMI calculator. It is a sure, easy, and user-friendly calculator for prospective homebuyers to understand the EMI and formulate their repayment plan. Those who intend to fund their homes by way of loan need to scrutinize and fix their monthly payment amount. This calculator needs information like the money you wish to borrow as Loan, the annual interest rate for Loan, and its duration. It gives you instant and accurate results based on your inputs.

Strategic planning of new home loan repayment assists in finance management and accomplishing your goal without tension. Certain helpful EMI repayment planning tips that can guide you towards your repayment schedule and be in control of your finances are:

Calculate your EMIs in advance

Compute your Equated Monthly Installments to see how much you owe back. Use the online Home Loan calculator to enter your Loan amount, interest rate, and tenure to find out how much your EMI payments are. Budget accordingly. Maintain the EMI vs income ratio at under 40% of your net monthly income, as it is utilized by lenders to judge your repayment ability. For instance, when you take a Home Loan of Rs. 50 lakh with 7.5% interest for 20 years, your EMI will be Rs. 37,153. Understanding this allows you to make informed choices and plan your Home Loan repayment period.

Select a longer Loan tenure

Select a longer Loan tenure to lower your EMI burden. Though a shorter tenure means paying lower interest in total, it can result in larger EMIs. If you have other financial obligations, choosing a longer tenure can give you some relief. For a Rs. 50 lakh Home Loan with an interest of 7.5%, the EMI for a tenure of 15 years would be Rs. 44,941, and for a tenure of 20 years, Rs. 37,153. A longer term provides a reasonable monthly repayment figure.

Prepay where possible

Another tip on how to plan EMI repayments is to prepay your Home Loan as much as possible. This makes you debt-free sooner. In case of availability of excess funds like annual bonuses, tax refunds, or inheritance, direct the funds towards prepayment of your Home Loan principal. Check if the lender imposes any penalty. For instance, if you prepay Rs. 5 lakh a year in advance, you can save almost Rs. 12 lakh in interest over the period.

Keep a good credit score

Better creditworthiness is represented by a high credit score, making you eligible for lower interest rates and improved Loan terms. Keep a track of it and do the needful to have a good score by paying bills in time, limiting multiple Loan enquiries, and low credit utilisation.

Consider Balance Transfer

If you come across a lender with a lower interest rate compared to your current Loan offer, you can choose a Home Loan Balance Transfer, where you shift the outstanding Loan amount to the new lender at a lower interest rate in order to save interest payments and ease your EMI burden. You can also improve your EMI repayment plan using this trick. But it attracts processing fees and other costs. Assess the overall savings and costs before deciding.

Consider your income, affordability, and repayment capacity before Home Loan application. Our Home Loan EMI calculator allows you to plan your repayments and enjoy a stress-free homeownership experience. Every small step really makes a difference while managing your Home Loan. Start following these tips today and gain control of your repayment schedule.